JBS one step closer to purchasing XL Foods Lakeside

CALGARY - Meat-packing giant JBS-USA is one step closer to purchasing the Brooks facility that was the centre of a tainted meat scandal earlier this year.

While a spokesperson for the subsidiary of Brazil-based JBS said a deal has not yet been finalized, the company is pursuing the regulatory approvals required for it to assume ownership of XL Foods’ Lakeside packing plant. On Dec. 21, the provincial government cleared the way under Alberta’s “Foreign Ownership of Land” rules for JBS to acquire the property and adjacent feedlot.

“We’re going through the appropriate regulatory process,” said Cameron Bruett, spokesperson for JBS-USA. “We will of course notify the market when we finalize that acquisition.”

JBS assumed management of the Brooks plant in October, following an E. coli scare that resulted in the largest beef recall in Canadian history. As part of their $100 million deal with XL Foods’ embattled owners — Edmonton-based Nilsson Bros. — JBS also obtained an exclusive option to buy the plant as well as packing facilities in Calgary, Nebraska and Idaho.

Alberta’s “Foreign Ownership of Land” regulations put limits on the amount of agricultural land that can be foreign-owned, unless a clear benefit to the province — economic or otherwise — can be demonstrated.

David Chalack, board chair of the Alberta Livestock and Meat Agency, said the other regulatory hurdle JBS will have to clear is the federal Competition Bureau, which must be notified of potential transactions of this size and significance. Chalack said he expects if that green light is granted, JBS’s purchase of the Brooks plant will be “imminent.”

During the height of the E. coli scare, when the XL Foods plant was temporarily shuttered by the Canadian Food Inspection Agency, cattle prices fell and ranchers had to either pay more to ship their cattle to other plants or lose money by holding on to cattle that were ready for slaughter. The Brooks plant, a 43,000 square foot facility, processes about one-third of Canada’s overall beef production.

JBS’s entry onto the scene was welcomed by many in the cattle industry who feared serious repercussions if XL Foods did not reopen.

But while Calgary Stockyards’ Bryan Danard said he believes a JBS takeover is good news for the immediate future, he questions whether the international meat-packing giant is interested in Brooks for the long haul.

“It is just one of 300 plants they own worldwide,” Danard said. “If it’s not economically making sense, I don’t think they’ll hesitate to shut it down. The packing business is very tough in Canada, so it wouldn’t be shocking if this happened down the road.”

Chalack disagreed, arguing a major international player is best placed to weather the ups and downs of a challenging industry.

“The larger the operation, the more global they are ... the better their management likely is, and the deeper their pockets. What local owner is going to sustain losses for very long?” Chalack said. “Sometimes the international guys have a little more staying power.”

The National Farmers’ Union has called for more competition in the Canadian meat-packing industry, saying the country’s processing plants are too large and too powerful. Board member Glenn Tait said on Thursday the organization stands by that position, but a JBS acquisition of the XL Foods plant won’t make the situation “that much worse than it was before,” and is a better option than allowing the plant to close.

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